There is plenty of buzz (and spin!) regarding Apple’s foray into “contactless payments” and how it might validate and accelerate an emerging trend. When I read CNN.com’s headline “The end of credit cards is coming” my natural skepticism went on high alert. A post on Payments.com by Karen Webster, partially in response to CNN’s article and the issue overall, really hit the nail on the head.

It is fun and compelling to learn about a heretofore unmet – or better yet, unknown! – consumer need that has been splendidly filled by an innovative and heroic entrepreneur. Even better if it is Steve Jobs and Apple – the darling, so far, of the first decade or so of the 21st century. The foreseeing of the unforeseeable is often referred to as unlocking “latent” demand. Demand we didn’t even know existed or in ways we didn’t foresee. Sometimes it happens and I’ve written about it on this blog and elsewhere.

The Payments.com post, however, pointed out that both unlocking latent consumer demand for mobile, contactless payments may not have arrived just yet. Karen pointed out many industry factors, ranging from too many competing approaches to too few points of sale (POS) for acceptance (and daunting costs to enable the millions of POS devices functioning perfectly well today across the country without “contactless” capabilities).

The most glaring thing missing in my opinion is less technological and more fundamental: the lack of a compelling value proposition to the parties involved (made up of consumers, payments processors & networks, and merchants). Is there a compelling value proposition to be had? If not, is there really any latent demand? Are we all really, unknowingly so far, just waiting for a way to ditch our current payment methods (e.g,. cash, debit and credit cards, gift cards, checks) for one that uses our mobile phones instead? While none are perfect are the available methods broken and of low enough utility to be replaced?

“It should be noted that Apple’s business model and track record is to be closed (a profitable strategy, no doubt), and another key player the mobile networks are notoriously closed and seeking a way to corner any market for themselves and control / disallow other alternatives.

Along with the sheer steepness of the adoption Karen points out, I think these forces will make it hard to see any widespread adoption soon. Forecasts so far are mostly hype.

Personally I also don’t see the creation of a compelling value proposition which is always required to unlock the so-called latent demand for a mobile & contactless payment alternative (other than the “cool” factor, and for certain high traffic environments where checkout speed might have high marginal value). Current consumer demand for payment methods is well satisfied without NFC (Near Field Communications)-enabled phones.”